- Today’s main news: VantageScore to include trending data or excessive credit capacity. Patch Homes exits beta, raises $1.5M. Chinese industry news.
- Today’s main analysis: The debate over U.S. fintech regulation. UK digital lenders can grow with more tech innovation.
- Today’s thought-provoking articles: FC lending impact, borrower stories.
- VantageScore to include trending data or excessive credit capacity. GP:”This is a huge change for VantageScore. I am not sure how many people use the Vantage score over FICO. Perhaps this is the difference that will make the VantageScore more relevant. “AT: “The FICO score is outdated. Trending data makes much more sense in calculating credit risk since people either meet their obligations or fail to meet them on a monthly basis as their payments are due. By observing trending data, lenders can determine whether a missed payment is due to a financial crisis unforeseen by the borrower or if the borrower simply has bad payment habits. A lot more can be determined with trending data, and the data is available.”
- An obscure regulatory debate has put the U.S. fintech community on edge. AT: “The headline is misleading. The fintech community isn’t on edge at all. State regulators are the ones on edge. The gist of the conflict is there is a power struggle brewing below the surface of the entire U.S. financial sector. States want to regulate fintechs, but the federal government wants that authority too. This battle will not be solved until it blows up into the public pundit-sphere and/or heads to the Supreme Court for a fundamental shake down. At some point, fintech companies themselves will have to weigh in. What is driving this is politics, nothing more.”
- Patch Homes exits private beta, raises $1.5M to revolutionize home equity. GP:” I am sure there is a cost somewhere as the company and investors have to make money. My best guess is that they take the lion’s share whent he home owner sells the house finally which should be translated into an actual APR over the duration of the deal to the home owner. 2 other companies who are doing the same thing had to discuss this APR with the regulator in fact which wanted it capped at 20%. “AT: “This is truly a revolutionary idea. Until now, homeowners in financial trouble had few options, one of which was to sell their home outright to some investor who would flip the house and squeeze its equity out for profit. With Patch Homes, homeowners can keep their homes, nix the monthly payment on a home equity loan, and simply sell a portion of their home equity to get the money they need right now. Keep the home, get the loan, and avert monthly payments. Not a bad deal.”
- KBRA upgrades rating on Avant Loans Funding Trust 2016-B. GP:”Great news for Avant.”
- CommonBond launches student loans for grads, undergrads. GP:”The take away here is loans for current studens, and not refinancing loans. A big step forward for fintechs. I think the key here is to find capital interested in 5.5% APR.”
- LendKey releases state of student loan refinancing report. GP:”Loan delinquency continues to drop.”
- SmartBiz Loans adds Five Star Bank to Technology Ecosystem. GP:”SmartBiz is now powering the tech for a bank called Five Star for SME lending. Yes, the title is confusing. A partnership that is in line with the OnDeck JPM Chase one for example.”
- PeerReality team change focus on secondary market platform CFX Markets GP:”CFX Markets is described as an end-to-end digital marketplace that is directly integrated with alternative asset issuers, broker-dealers and transfer agents to streamline the process of secondary market trading of alternative assets.”
- Podcast: Andy Rachleff, CEO of Wealthfront. GP:”Remember, Wealthfront is starting doing loans.”
- The 5 key elements of new LC, Prosper investors.
- Why the future of credit could like in ‘social vouching’. AT: “I’m not sure I like the idea of credit being a popularity contest.”
- GAO fintech report highlights data security, lack of clarity on regulation.
- How startups are transforming real estate at Disrupt NY.
- Bankruptcy attorney speaks about risks of online lending.
- UK digital lenders can harness growth opportunities with more tech innovation. “As of the end of 2016, nine key digital lenders in the U.K. had originated £6.69 billion in loans. Digital lenders in the U.K. could enjoy significant growth as new account options and continued political and regulatory support boost awareness of and participation in the industry. “
- April lending impact, borrower stories at Funding Circle.
- Flux wants to make paper receipts obsolete. AT: “I am generally in favor of anything that reduces the amount of paper in circulation.”
- LendInvest completes first Scotting refurbishment loan.
- P2P lending + insurance accounts for 1/6 of all platforms. GP: “55 p2p platforms cooperating with insurance companies is a big deal and to my knowledge hasn’t really happened outside China. Worth a look. “
- The challenges China fintech will need to tackle for long-term growth. AT: “This isn’t earth shattering news, but not being able to find the right talent could put Chinese companies at a competitive disadvantage as the global fintech scene heats up.”
- Sailing Capital leads $60M round in Chinese AI firm SenseTime.
- Fintech disruption in lending space is very slow. GP:” Even in the US, 7 years later fintech for unsecured lending is around $20bil vs a market of around $1 trillion.”
- United States
- Major changes coming to how your credit score is calculated (CNBC), Rated: AAA
- An obscure regulatory debate has put the entire U.S. fintech community on edge (TechCrunch), Rated: AAA
- Patch Homes Exits Private Beta and Raises $ 1M to Revolutionize Home Equity (Patch Homes Email), Rated: AAA
- KBRA Upgrades and Affirms Ratings on Avant Loans Funding Trust 2016-B (KBRA Email), Rated: A
- CommonBond Launches Student Loans for Undergraduate, Graduate Students (Yahoo! Finance), Rated: A
- LendKey Releases State Of Student Loan Refinancing Report (PR Newswire), Rated: A
- SmartBiz Loans Adds Five Star Bank to Technology Ecosystem (SmartBiz Loans Email), Rated: A
- PeerRealty Founders Shift Energy to Secondary Market Platform CFX Markets (Crowdfund Insider), Rated: A
- Andy Rachleff, Co-founder and CEO, Wealthfront (Stitcher), Rated: A
- The Five Key Elements for New Lending Club and Prosper Investors (Lend Academy), Rated: A
- Why the future of credit could lie in ‘social vouching’ (Tearsheet), Rated: A
- GAO’s Fintech Report Highlights Data Security, Lack of Clarity on Regulatory Oversight (National Law Journal), Rated: B
- Find out how startups are transforming real estate investing at Disrupt NY (TechCrunch), Rated: B
- Bankruptcy Atty Bruce Feinstein Speaks About The Risks of Online Lending Services (PRWeb), Rated: B
- United Kingdom
- UK digital lenders can harness growth opportunities with more tech innovation (S&P Global), Rated: AAA
- Your April Impact – Lending Impact and Borrower Stories (Funding Circle), Rated: AAA
- Flux wants to make paper receipts obsolete (TechCrunch), Rated: A
- LendInvest completes its first Scottish refurbishment loan (Development Finance Today), Rated: A
- Alternative Finance And The Rise Of The Fintech Unicorn (Forbes), Rated: A
- Industry News-China (Xeenho Email), Rated: AAA
- The Challenges China’s Fintech Sector Will Need To Tackle For Longterm Growth (Forbes), Rated: A
- Sailing Capital Leads $ 60M Round In Chinese AI Firm SenseTime (China Money Network), Rated: A
- ‘Fintech Disruption In Lending Space Is Very Slow Now’ (Entrepreneur India), Rated: A
- Visa’s new partnership to develop FinTech talent in Singapore (Human Resources Online), Rated: A
Major changes coming to how your credit score is calculated (CNBC), Rated: AAA
The math behind your credit score is getting an overhaul, with changes big enough that they might alter the behavior of both cautious spenders as well as riskier borrowers.
The new method is being implemented later this year by VantageScore, a company created by the credit bureaus Experian, TransUnion and Equifax. VantageScore handled 8 billion account applications last year, so if you applied for a credit card, that score was likely used to approve or deny you.
Using what’s known as trended data is the biggest change. The phrase means credit scores will take into account the trajectory of a borrower’s debts on a month-to-month basis. So a person who is paying down debt is now likely to be scored better than a person who is making minimum monthly payments but has been slowly accumulating credit card debt.
An important metric in calculating credit scores has been the portion of their available credit people are actually using. A person with $5,000 in credit card debt with a $50,000 limit across several cards could score better than someone with $2,000 in debt on a $10,000 limit because of that ratio.
But VantageScore will now mark a borrower negatively for having excessively large credit card limits, on the theory that the person could run up a high credit card debt quickly.
Taking civil judgments, medical debts and tax liens out of the equation comes after a 2015 agreement between the three credit bureaus and 31 state attorneys general.
People with those items on their credit reports now could see a bump of as much as 20 points. But it won’t help much if they also have negative marks like delinquencies and debts that have gone to collection.
Mortgages, though, won’t be affected.
An obscure regulatory debate has put the entire U.S. fintech community on edge (TechCrunch), Rated: AAA
An obscure request for comments on regulatory standards, released by the Office of the Comptroller of the Currency (OCC) last March, has since evolved into a complex turf war between the states and Washington, DC.
The debate centers around a proposal made in December by Thomas J. Curry, the Comptroller of the Currency, in which the OCC details a program for fintech companies to apply for charters as “special purpose national banks.”
Though fintech can still be thought of as a relatively young industry, it is growing quickly enough that it may soon determine how most people save, exchange and invest their money. This proposal comes at a time when the world — from the U.K. to Germany to India to Korea — is evaluating what kind of guard rails the fintech sector needs.
With this in mind, the OCC wants to take the first step to create a uniform, nationwide set of standards for fintechs. But what should have been an uncontroversial first step instead unearthed a slew of objections from a complex web of stakeholders. These parties quickly raised concerns about stifling innovation, overstepping the limits of federal authority and understanding the nuances of fintech, among many others. At the very heart of this battle is the question of what fintech really is. And as evidenced by the debate, that question is much harder to answer than it may seem.
Financial malpractice is just as pernicious today. In its first five years, from 2011 to 2016, the new Consumer Financial Protection Bureau (CFPB) received more than 900,000 consumer complaints about financial services providers.
Fintechs themselves have not been free from fraud and scandal. The publicly traded TrustBuddy, based in Sweden, was forced into bankruptcy for massive misappropriations of investor funds. Cincinnati-based SoMoLend came under similar fire for misleading investors. And China’s peer-to-peer lending sector has spent years battling its way out of the shadow of massive fraud that has tainted the industry.
Weirdly enough, fintech companies, which will arguably be the most impacted by the charter, have been relatively quiet. The strongly vocal opponents of the charter have been an alphabet soup of state regulators, who view this move as a broad overreach of federal authority:
- New York: DFS Superintendent Maria T. Vullo in January released a stern public comment letter to the OCC. In it, she argued that banks with national charters don’t have to abide by some state lending rules, and this charter could allow payday lenders to sign up for protections meant for tech companies.
- Florida: OFRC Commissioner Drew Breakspear called the charter a “solution to a problem that does not exist.”
- Ohio and Oregon: Senators wrote in to the OCC saying this would complicate existing state fintech laws and initiatives.
- California: Jan Lynn Owen, the commissioner of the CA DBO, argued that the proposal would complicate the DBO’s efforts to compile data on online marketplace lenders — such as fintech firms SoFi, Lending Club, Funding Circle and Prosper — in order to separate them from payday lenders.
Even so, to give some credit to regulators, there are still very real reasons this charter could easily hurt the not-nascent-but-not-yet-matured fintech sector in many ways:
Bureaucracy: The OCC has granted only one national bank charter in the last six years. Would it move quicker to enable fintechs? It’s difficult to see how it would.
- One-size-fits-all: Fintechs are too diverse to be included in a charter generally drafted to legitimize deposit-holding institutions. As The Hill notes, this charter could lump together “payday lenders, marketplace lenders, and peer-to-peer payment companies” with robo-advisers, bank service providers, insurance tech, stock market apps, etc… Should they all be treated as banks?
- A competitive moat: Though the charter could narrow the gap between fintechs and banks, allowing fintechs to compete nationally instead of applying for state-by-state licenses, it could also lead to a “thinning of the herd” by being too cumbersome or expensive for young companies. This could easily stifle innovation.
- More compliance risks: Fintechs could find themselves written into a narrower and narrower regulatory box, increasing the chances they’re shut down for benign compliance missteps.
- Balkanized regulators: Similar to the CFPB’s “no action letter,” which promises the bureau won’t take action against companies that meet its standards, gaining a charter from the OCC still won’t shield fintechs from other regulators who may have different rules.
Predictably, it seems national regulatory agencies such as Moody’s are in favor of the charter. Credit unions, which see the charter as a way to level the playing field with fintechs, are also in favor. The Conference of State Bank Supervisors is against it. It seems everyone but fintechs themselves has an opinion on the charter.
Despite the heated pushback against the OCC’s charter plan, there are still very good reasons for centralized, consistent and national oversight of the fintech industry. As ex-Treasury Secretary Tim Geithner notes in Stress Test, his excellent memoir of the financial crisis, one of the reasons the Great Recession was so bad was that the “safeguards for traditional banks weren’t tough enough […] but what made our storm into a perfect storm was nonbanks behaving like banks without bank supervision or bank protections.”
Then what would a good set of national fintech regulations look like?
It would set basic underlying consumer protections. For instance, no fintech firm should be allowed to misrepresent its fees — and this is something that shouldn’t vary by state.
It would preserve state sovereignty.
It would recognize the heterogeneity of fintech. Most fintechs disintermediate banking services, each tackling only one of a wide range of services. On top of that, some fintechs (Zopa, SoFi) are themselves starting to build banks, while others (Moven, Monzo, Atom) want to be “bank-lites.” A banking charter runs the risk of being too broad (and weak) or too narrow (and inflexible). Regulation should be flexible enough to encompass new fintech models as they develop, without risking losing its teeth.
It would promote innovation while following the Hippocratic Oath of first doing no harm.
Like many black markets, alternative finance and shadow banking would be safer if it were brought into the light and monitored.
Patch Homes Exits Private Beta and Raises $ 1M to Revolutionize Home Equity (Patch Homes Email), Rated: AAA
Patch Homes, a home equity financing platform that creates a way for existing homeowners to cash out equity at 0% interest with no monthly payments, today announced it is coming out of private beta in California. The company recently secured $1.0 million in seed funding, led by prominent venture capital firms and fintech angel investors, including Techstars Ventures, KIMA Ventures, Eric DiBenedetto and Airbnb co-founder Nathan Blecharczyk, among others.
“There’s a problem with the current home financing market, in that 67% of homeowner wealth is trapped in home equity,” said Sahil Gupta, Co-founder of Patch Homes. “Most homeowners are asset-rich but cash-poor, and we want to help bridge that gap and solve their cash flow problems. Our model offers home equity financing without any monthly payments, allowing homeowners to tap into their home equity and use their money the way they choose, whether to pay down debt, invest in their future, or make needed home improvements. Each Patch Homes’ product should be a step toward making homeownership a more affordable, accessible and liquid investment.”
In exchange for 0% interest, Patch Homes shares in future appreciation or depreciation of the home value. The model allows customers to receive capital from investors to finance their home equity, without interest rates or monthly payments, in exchange for a fraction of future home value change. Both the homeowner and investor will see a profit when the home appreciates in value and Patch Homes will share in downside loss with homeowners, should the house decrease in value.
Each contract has a 10-year term, although homeowners have the option to exit the contract by selling or refinancing their home at any time before that, without any penalty or exit fees. In the meantime, homeowners can use the cash newly freed up from home equity however they choose.
“What’s unique about Patch Homes is that it’s solving a problem for more than 40% of US homeowner population,” said Eric DiBenedetto, an investor in Patch Homes, an early backer of Lending Club and an active real estate investor.
The company has reached several key milestones in the past year, including launching a digital financing portal for homeowners and bringing investor capital to the company platform.
“Throughout our beta program, we saw homeowners engage deeply with the product and debt-payoff was among the top reasons for cashing out equity” said Sundeep Ambati, Co-founder of Patch Homes. “We’re excited about bringing a new approach to the way Americans look at financing their homes. There is over $4.5 trillion in untapped home equity across millions of homeowners in the US. They want something that is suited to their needs and financial circumstances.”
The seed funding will enable Patch Homes to expand its team and geographical footprint, and continue to develop its innovative solution and assist with marketing efforts. Patch Homes currently serves homeowners in California, with plans to expand to additional states before the conclusion of the year.
KBRA Upgrades and Affirms Ratings on Avant Loans Funding Trust 2016-B (KBRA Email), Rated: A
Kroll Bond Rating Agency (KBRA) upgrades the rating on two classes and affirms the rating on one class of notes issued under the Avant Loans Funding Trust 2016-A (AVNT 2016-A), a consumer loan ABS transaction which closed on April 28, 2016.
The current credit enhancement levels are 86.62% for the Class A notes, 47.01% for the Class B notes, and 23.86% for the Class C notes. Credit enhancement consists of overcollateralization, subordination of junior notes, cash reserves, and excess spread. While losses are above KBRA’s base case loss expectation to date, the continued deleveraging and build in credit enhancement outweighs an increase in loss levels. The transaction has breakeven loss multiples which are sufficient for an upgrade of the rating on the Class A and Class B notes and an affirmation of the rating on the Class C notes.
Read the report here.
CommonBond Launches Student Loans for Undergraduate, Graduate Students (Yahoo! Finance), Rated: A
CommonBond, a leading financial technology company that helps students and graduates pay for higher education, today announces the launch of student loans for undergraduate and graduate students. This launch makes CommonBond the first and only company in the country to offer a full suite of student loan solutions, including loans for current students, refinance loans for graduates, and employer student loan benefits for employees.
“Since CommonBond first helped pioneer student loan refinancing nationwide, we’ve seen very little innovation in the student loan industry,” said David Klein, CEO and co-founder of CommonBond.
CommonBond’s new in-school loans provide:
- Competitive interest rates: CommonBond’s rates are among the most competitive in the industry, with variable rates starting at 2.87% APR with autopay discount and fixed rates starting at 5.50% APR with autopay discount.
- Flexible repayment options: CommonBond offers four different repayment options for students in school: deferment, fixed monthly payment, interest-only payment, and full monthly payment.
- Award-winning customer service: CommonBond knows that paying for college is the first major financial decision that many students make, and provides best-in-class care for prospective and current members.
- An industry-first social mission: CommonBond enables its members to drive social good when taking out a student loan. For every student loan funded by CommonBond, the company also funds the education of a child in need through a partnership with Pencils of Promise.
CommonBond is also introducing an interactive tool that helps students understand the financial impact over time of different student loan options, enabling them to make informed financial choices.
CommonBond has funded more than $1 billion in loans to date.
LendKey Releases State Of Student Loan Refinancing Report (PR Newswire), Rated: A
LendKey, the lending-as-a-service provider for banks and credit unions, today released its Student Loan Refinance Report, its second in a series that highlights borrower trends across banks and credit unions. This latest report focuses on the state of student refinancing including the borrower demographic, their lending preferences and loan performance. Key findings show that the student refi market is healthy for banks and credit unions, as well as borrowers, who save an average of 2.2% in annual interest expense after refinancing.
“The LendKey report found that students who refinance significantly reduced their student loan debt over the life of the loan, a substantial amount considering the average student debt is $37,000 for the class of 2016,” said Salil Mehta, SVP of Credit Risk & Analytics, LendKey. “The overall health of the student refi industry proves how beneficial such products are to financial institutions and their millennial customers.
The report leverages data from LendKey’s network of 275 bank and credit union partners nationwide, and examines a seven-year span of borrower data from 2011 – 2017. Key highlights of the report include:
- Loan originations: LendKey’s clients totaled $770+ million in originations; outstanding loan balance was close to $620 million.
- Borrower savings increased: Borrowers saved an average of 2.2% in annual interest expense over the life of each loan.
- Borrower age increased: Average age of a borrower has increased slightly over the years; in 2016 the average age at the time of refinance was 28.7 years for a borrower with an undergraduate degree and 34.3 years for a borrower with a graduate degree.
- More graduate students are refinancing: In 2016, borrowers with a graduate degree represented close to 30% of originations compared to 20% in 2011.
- Delinquency rates have dropped: Loan performance has improved over the past seven years as delinquency and default rates have dropped. The report found that 30-89 and 90+ day delinquencies are currently 2.2% and 0.5%, respectively.
Student loan debt now exceeds $1.3 trillion and is the largest non-real estate debt among US consumers.
LendKey partners with banks and credit unions to offer a complete online lending solution, including a customized refinancing product. LendKey’s services include loan acquisition, loan origination and loan servicing through a white-labeled platform hosted by the financial institution.
SmartBiz Loans Adds Five Star Bank to Technology Ecosystem (SmartBiz Loans Email), Rated: A
SmartBiz Loans, the first SBA loan marketplace and bank-enabling technology platform, today announced the addition of Five Star Bank (www.fivestarbank.com) to the Company’s unique technology ecosystem. SmartBiz Loans’ intelligent technology platform will match Northern California-based Five Star Bank to the right customers in a fraction of the time, allowing the bank to originate SBA loans more efficiently while increasing the likelihood that small business owners using SmartBiz® will receive funding.
The partnership underscores the ability for banks and fintech companies to work together in more creative and collaborative ways to better meet customer needs by combining the speed and agility of new technology with the security and infrastructure of traditional banks. SmartBiz Loans’ focus on regulatory compliance along with their deep knowledge of banks’ unique business requirements, make it an attractive partner for banks looking to expand their reach and ability to underwrite SBA loans.
SmartBiz’s full-stack, intelligent technology platform creates an environment of data stewardship in which banks’ data is protected and analyzed to the highest standard. It incorporates elements of artificial intelligence, machine learning and big data analytics to bring agility and efficiency to underwriting and originating government-backed SBA loans. By automating each bank’s underwriting criteria, SmartBiz eliminates weeks of work for banks, and allows banks to originate more loans to customers they may not have previously served while cutting banks’ processing costs by up to 70 percent. On average, 90 percent of the loan applications SmartBiz refers to its bank partners are approved.
PeerRealty Founders Shift Energy to Secondary Market Platform CFX Markets (Crowdfund Insider), Rated: A
Following the announcement that real estate crowdfunding platform PeerRealty had been sold to Brelion, founders Jordan Fishfeld and Juan Hernandez are shifting their energy to solving a pressing issue in the alternative finance space: creating a secondary market for alternative assets including securities sold on real estate crowdfunding platforms.
CFX Markets is described as an end-to-end digital marketplace that is directly integrated with alternative asset issuers, broker-dealers and transfer agents to streamline the process of secondary market trading of alternative assets.
CFX Markets is not alone in targeting this emerging opportunity. Traditional marketplaces such as OTC Markets, NASDAQ and NYSE have each expressed a certain amount of interest in providing liquidity for new asset classes.
Andy Rachleff, Co-founder and CEO, Wealthfront (Stitcher), Rated: A
Christophe Williams (MBA ’18) chats with Andy Rachleff, co-founder and CEO of Wealthfront. Andy discusses a wide range of topics in FinTech, investing, and how to grow tech companies. He goes in-depth on Wealthfront’s competitive advantages in automated investing and how he approaches product/marketing strategy to grow sustainably. Also covered are Andy’s background in venture capital, the process of founding Wealthfront, and how he sees disruptive innovation affecting financial service incumbents.
The Five Key Elements for New Lending Club and Prosper Investors (Lend Academy), Rated: A
- Diversify Your Investment
- Expect Defaults
- Keep Your Cash Balance Low
- Automate Your Investing
- Avoid Taxes by Investing Through an IRA
Why the future of credit could lie in ‘social vouching’ (Tearsheet), Rated: A
For Kundu and others working in the space, ‘inclusion’ is more about creating a another kind of credit system that’s based on social vouching and support. Inspirave’s platform, Kundu said, brings in the notion of a social network of friends and family that can help an individual reach their financial goals and in turn, help vouch for the individual. Instead of a formal credit score, the idea of using a social network of referees acts as a powerful counterpoint to traditional credit assessment systems that exclude millions of Americans who don’t have bank accounts or credit cards.
“We don’t think of traditional due diligence of loan underwriting, a formal business plan or technical due diligence,” said Kelly Chan of Kiva U.S., a nonprofit that’s the U.S. arm of a global online marketplace for crowd-funded small-scale loans. “We’re looking to a social community knowing you have a group of supporters to back you or vouch; for example, ‘Sally is a wonderful mother worthy of Kiva loan.’”
The notion of ‘social underwriting,’ Chan said, can create economic opportunities for Kiva’s 3,700-strong community, many of whom are small-business owners.
GAO’s Fintech Report Highlights Data Security, Lack of Clarity on Regulatory Oversight (National Law Journal), Rated: B
Other risks aside from data security cited by the GAO in fintech include:
Marketplace lending: The GAO said payment terms presented by fintech companies in this area must be transparent because “it can be difficult for small businesses to understand and compare loan terms such as the total cost of capital or the annual percentage rate.” The study also suggests there is a risk that small business borrower protections could be overlooked.
Mobile payments: The GAO study indicates that potential risks associated with mobile payments are similar to those found with traditional payment products. The report states that if a smartphone is hacked, lost or stolen or “if a company does not sufficiently protect mobile transactions,” that could be problematic. Another concern is that consumers could deposit or send money to the wrong person with P2P payments.
Digital wealth platforms: Insufficient or incomplete information from customers could cause trouble for digital wealth platforms.
Distributed ledger technology: “The Financial Stability Oversight Council noted that market participants have limited experience working with distributed ledger systems, and it is possible that operational vulnerabilities associated with such systems may not become apparent until they are deployed at scale,” the report said.
Find out how startups are transforming real estate investing at Disrupt NY (TechCrunch), Rated: B
First up is Ryan Williams, CEO of Cadre, a company that provides a marketplace of investment opportunities for real estate investors. Founded in 2014, Cadre does all the sourcing, due diligence, decision-making and management of investments it makes available, providing a greater level of transparency and oversight to potential investors than was previously available.
Also joining us is Eddie Lim, CEO of home equity platform Point. His company enables homeowners to unlock the value of real estate they own by selling equity to investors rather than accruing debt by refinancing their homes.
A sudden need for money, like an unexpected medical expense, can lead people to seek a quick source of cash. Online lending services have been eager to fulfill this need, offering fast loans without a credit check. But these loans often come with a slew of consequences, such as high interest rates, hidden fees, and contracts that drag out payments.
“Predatory loans like these can have APRs of over 300%,” explains Mr. Feinstein. “People end up paying several times the cost of the original loan without knowing it, leaving them with no choice but to file for bankruptcy.”
There are some protective laws in effect – for example, the Military Lending Act protects active duty members from being charged interest rates higher than 36% on most consumer loans, including payday loans.
UK digital lenders can harness growth opportunities with more tech innovation (S&P Global), Rated: AAA
While the U.K. government regulates and champions these lenders, their loan origination growth has trailed that of their U.S. peers. Lower amounts of equity funding to build out technology and continued use of more human processes compared to U.S. digital lenders are some of the reasons for this divergence. Now is the time for U.K. platforms to embrace technological innovation in order to capture future growth opportunities.
A new report by S&P Global Market Intelligence estimates that as of the end of 2016, nine key digital lenders in the U.K. had originated £6.69 billion in loans since their respective inceptions. The nine largest platforms covered in our 2016 U.S. Digital Lending Landscape had originated the equivalent of £53.69 billion from their respective inceptions through the end of 2016.
Using data from venture capital database Crunchbase, we see that as of the end of 2016, nine major U.S. digital lenders, excluding Square Inc.’s digital lending platform, had received $3.49 billion in equity funding. This allowed them to invest more in costly technological build-ups, while their U.K. peers had received only $470.6 million in equity funding through the same date.
In the fourth quarter of 2011, only four of the nine lenders in our report were originating loans. Total originations for that quarter came in at just £27.2 million. Quarterly originations for these nine lenders grew 33.79% year over year to £803.6 million in the fourth quarter of 2016. During the second quarter of 2016, originations dropped due to uncertainty related to Brexit but rebounded in the third quarter and continued to grow.
Meanwhile digital lenders saw SME loan originations increase 23.9% year over year in the third quarter of 2016, followed by an 81.8% year-over-year jump to £357.5 million in the fourth quarter.
Digital lenders in the U.K. could enjoy significant growth as new account options and continued political and regulatory support boost awareness of and participation in the industry. With these prospects on the horizon, digital lenders will need to invest in technology and automate some processes that humans currently handle.
Your April Impact – Lending Impact and Borrower Stories (Funding Circle), Rated: AAA
This month we hit more than 60,000 investors, big and small, lending to businesses through Funding Circle. Together your lending is having a real impact on the UK economy. Already in 2017 you’ve helped more than 5,000 businesses access much needed finance to grow and prosper.
Firstnet create 100 new jobs in Leeds
To facilitate the launch of their new data centre, Firstnet Solutions Ltd borrowed £74,480 in October 2016.
Paralympian goes for gold with a Funding Circle loan
Husband-and-wife team Peter and Linda Norfolk are well-experienced in achieving excellence. Nicknamed ‘The Quadfather’, Peter Norfolk OBE is a double paralympic gold medal and multiple Grand Slam winning wheelchair-tennis player, while Linda was Head of Physio for the Paralympic GB team at the Athens Games.
To hire two new members of staff, Equipment for the Physically Challenged (EPC) borrowed £30,000 in 2016.
Flux wants to make paper receipts obsolete (TechCrunch), Rated: A
The company, which is de-cloaking this week with a pilot in East London, has built a software platform that bridges the gap between the itemised receipt data captured by a merchant’s point-of-sale (POS) system and what little information typically shows up on your bank statement or mobile banking app.
To be clear, this isn’t digitising paper receipts with OCR, but — by partnering with merchants, their payment processor/POS systems, and banks — making item level receipts digital in the first place. Flux’s first live integration is with EAT and Bel-Air on the merchant side, and digital-only bank Monzo.
“We are… building a software layer that is agnostic to the financial institution or retailer that it plugs into,” Cusden-Ross says. “We connect retailers via a software plug-in to their point of sale and to the consumer via an integration to their mobile banking app. Flux automagically links receipts to your bank card as you pay. Receipts are stored in the same place your transactions live today, your bank statement. Just open up your bank app and you’ll find all the receipts as well as any loyalty right there, it’s seamless and intuitive”.
LendInvest completes its first Scottish refurbishment loan (Development Finance Today), Rated: A
Launched in February, the new product is lent against a borrower’s gross development value (GDV) to provide more leverage for the developer and reduce the capital needed up front.
Upon completion of the refurbishment, the property will be a two-storey house with three bedrooms and is expected to be sold for around £375,000.
The loan was based on 70% GDV over nine months at a rate of 1.1% per month.
Alternative Finance And The Rise Of The Fintech Unicorn (Forbes), Rated: A
China’s fintech sector certainly boomed last year especially after Alibaba’s payments company Ant Financial set records with a $4.5 billion funding round. The impact of Brexit is yet to be seen on the UK and Europe as a whole, but investors are still seeing the potential for financial technology in the region, according to the report. G.P. Bullhound highlights that the UK could be described as a standout leader because of three fintech unicorns, or companies that are valued at over $1 billion: Funding Circle, Paysafe and Transferwise.
Despite Asia’s leadership and growth in the alternative finance space, the same could be said about the European market.
Statistics revealed in the report that alternative finance is currently the most successful fintech vertical, ahead of digital payments, digital banking, insurtech and asset management. While in China eight of the 13 fintech unicorns are operating in the alternative finance field, the term ‘alternative’ is somewhat less relevant in the UK and G. P. Bullhound claim that this is because these regions are held back by traditional systems. Perhaps this is why China is forging ahead in the financial technology race?
Industry News-China (Xeenho Email), Rated: AAA
In China, 55 P2P lending platforms cooperating with insurance companies, accounting for 1/6 of all the platforms. Currently, the types of insurance applied in P2P are mainly surety insurance and safety insurance for personal account. However, the insurance is not unlimited. According to a drafted document from China Insurance Regulatory Commission: if the policy holder is a natural person, the maximum coverage is 1 million RMB.
To implement the special rectification of risks of P2P Lending required by P2P Remediation Office, the first tier cities including Beijing, Shanghai, Guangzhou and Shenzhen have been starting an all-round investigation of Cash Loan. Last Thursday, the Association of Internet Finance of Shenzhen promulgated documents to asks platforms submit details of Cash Loan business monthly.
On April 18th, a Cashless Alliance led by Alipay launched in Hangzhou, China. UN Environment and Ant Financial advocate a low-carbon business together with other 15 alliance members. As one of the sponsors, the parent company of Alipay, Ant Financial announced that they will provide 6 billion RMB to help the process of cashless in two years. The efficiency of business will be promoted by 60% by using the cashless pay and data sharing. Every 3580 payment equals to the plant of a bell hammer. The existing Alliance members including: Alipay, Carrefour(China), CAH, HUAQIANG Group, OFO Inc., BESTORE etc. Now, the alliance is open for all the global businesses and organizations.
Venture capital investment in Chinese financial technology firms surpassed $6.7 billion in 2016. The reason for this is simple: China is home to the largest markets for digital payments and online lending. About 40% of consumers use new payment methods. As a result, China boasts the world’s four largest fintech “unicorns,” or startups valued at over $1 billion, including Ant Financial, Lufax, JD Finance and Qufenqi. These firms received large amounts of funding in 2016, with Ant Financial alone receiving $4.5 billion.
China Rapid Finance, a peer to peer lending company, has been approved for listing on the New York Stock Exchange and is planning to raise $100 million for its IPO. Chinese fintech firm CreditEase signed an agreement to provide up to $1.4 billion in funding to American real estate firm Tishman Speyer through sales of its wealth management products.
China’s fintech industry faces some major challenges, however. First is a shortage of skilled workers, and second are increased regulations, particularly in the digital loan sector.
Companies face difficulties in filling positions for software developers and product managers.
The China Banking Regulatory Commission published the Guidelines on Depositing and Managing Online Lending Capital in February, requiring user funds be deposited into commercial banks, transactions be approved by both borrower and lender, and clear records of transactions be recorded. This will help to curb the risky behavior of industry firms, about 60% of the roughly 5,000 which fail to comply with regulations.
Sailing Capital Leads $ 60M Round In Chinese AI Firm SenseTime (China Money Network), Rated: A
Sailing Capital International (Shanghai) Co., Ltd., a RMB-denominated investment and loan fund created under the support of the Shanghai Municipal Government, has led a US$60 million series funding round in SenseTime, a Beijing-based artificial intelligence start-up.
Founded in 2014, SenseTime says its face recognition technology has an error rate below one in 100,000. It also provides text, vehicle and image recognition to mobile Internet companies, financial services and security companies.
‘Fintech Disruption In Lending Space Is Very Slow Now’ (Entrepreneur India), Rated: A
The peer-to-peer (P2P) lending space is fast becoming popular in India and abroad as a viable option for borrowers and lenders. The model’s success lies in its ability to connect borrowers, who are in dire need of money with lenders, who are ready to provide for higher returns.
According to Rajat, the disruption by the fintech sector is very slow right now.
“It would be false to state that the fintech companies are eating into the role of banks and NBFC. The sector can really grow very fast. In the next five to 10 years, we will observe a lateral shift in the trend with more and more customers moving to the digital mode, especially for financial services that lend itself to the digital platform like music industry,” he added.
Visa’s new partnership to develop FinTech talent in Singapore (Human Resources Online), Rated: A
With an increased prominence of fintech in Singapore, demand for locals with the relevant knowledge and skills have gone up. In order to nurture future talent in the industry, Visa today announced a partnership with local polytechnics and Singapore FinTech Association.
According to a press statement, as part of this partnership, students from the five polytechnics in Singapore will have the opportunity to engage with payment experts from the global payments technology company.
“Through this initiative, students will attend learning sessions conducted by Visa representatives and be involved in business case challenges. We hope to inspire our young talent to join this exciting community,” she added.